Sideways Vibes Won't Give Up Just Yet
Bonds made a move yesterday with yields breaking below the lower boundary of the prevailing consolidation range. This type of breakout is a positive sign, generally, but it requires confirmation from the following day of trading (i.e. today). Earlier today, it looked like confirmation was in the cards, but things went south heading into the close of the European session. Yields jumped modestly higher, breaking above the 1.30% technical level in 10s, even if not by much. This suggests short-covering was a driver of yesterday's rally and that sideways vibes remain in the slightly bigger picture.
Fed MBS Buying 10am, 1130am, 1pm
Core CPI (y/y) 4.0 vs 4.2 f'cast, 4.3 prev
Flat to slightly stronger overnight despite some unfriendly data in Europe. 10yr down 2bps to 1.263 and MBS up 2 ticks (0.06) so far.
Slightly weaker now after AM data (mostly due to NY Fed Manufacturing). 10yr up 0.3bps to 1.287 and MBS now down 1 tick (-0.03).
Weakness continued gradually at first, but accelerated a bit in the past half hour. MBS now down more than an eighth vs highs and just under an eighth on the day. 10yr yield up 2.3bps at 1.307%.
Modest recovery heading into after hours session. In fact, the recovery arguably began right when EU markets closed for the day (not a coincidence if we're viewing EU bond weakness as a factor today). 10yr yields now up 1.7bps at 1.301, and MBS down less than an eighth.